Good Benchmark for Profit Margins for a Sporting Goods Store

by Clayton Browne, Demand Media

Sporting goods stores are a popular retail business.

Creatas Images/Creatas/Getty Images

Profit margins can be useful metrics for comparing businesses. A business with high profit margins can make equal net profits on significantly less sales than a low profit margin business. Profit margins vary greatly by industry, so while a 40 percent gross profit margin may be above average for a sporting goods retail business, it is well below average for a semiconductor company. Profit margins are only good relative benchmarks for comparing companies within an industry.

Gross Profit Margins

The consumer retail industry tends to have relatively low gross profit margins. A few retail businesses such as jewelry stores and antique shops generally have higher gross profit margins, but most retail businesses such as grocery stores and consumer electronic outlets only average single digit gross profit margins.

Sporting Goods Stores

According to The Retail Owners Institute, sporting goods stores averaged around 37 to 38 percent gross profit between 2006 and 2010. The largest average gross profit margin for sporting goods stores was 38.5 percent in 2008, and the smallest was 36.9 percent in 2010.

Net Profit Margins

Despite the over 37 percent average gross profit margin for sporting goods stores, the average pre-tax net profit margin fluctuated in a range of .8 to 1.5 percent from 2006 to 2010. This relatively slim net profit margin results from the relatively high overhead of sporting goods stores, as they have to maintain large floor spaces and typically have relatively high advertising costs. However, as most sporting goods stores sell a reasonably high volume of goods, they can still make a decent profit despite the slim net profit margin.

Return on Assets & Return on Equity

Two other profit-related benchmarks to consider in evaluating sporting good stores are return on assets (ROA) and return on equity (ROE). According to The Retail Owners Institute, the ROA for sporting goods stores ranged between 3 and 4 percent from 2006 to 2010, and according to IClub Central, the five-year average ROE for publicly-traded sporting goods companies was 15.4 percent as of December 2010.

About the Author

Clayton Browne has been writing professionally since 1994. He has written and edited everything from science fiction to semiconductor patents to dissertations in linguistics, having worked for Holt, Rinehart & Winston, Steck-Vaughn and The Psychological Corp. Browne has a Master of Science in linguistic anthropology from the University of Wisconsin-Milwaukee.

Photo Credits

Have Feedback?

Thank you for providing feedback to our Editorial staff on this article. Please fill in the following information so we can alert the Small Business editorial team about a factual or typographical error in this story. All Fields are required.